On March 9, Carnegie Mellon economist Allan Meltzer argued in the Wall Street Journal ("A Look At The Global One Percent") that income inequality is a global phenomenon and therefore not a problem that can be solved through changes in U.S. domestic policy. He's right about the first proposition and wrong about the second.
Actually, he isn't even entirely right about the first. Yes, income inequality is occurring globally. But it isn't happening uniformly. Until recently it was declining in France, Ireland, and Spain. Now it's declining in Turkey and Greece, and it's basically flat in France. (There isn't good recent data for Ireland and Spain.)
Among the industrial democracies where income inequality is increasing, it's much worse in the United States than it is almost anywhere else. Among 34 nations recently surveyed by the OECD, the United States got beat only by Turkey, Mexico, and Chile. That's as measured by the Gini coefficient, and including taxes and government transfer payments.
Do those taxes and transfer payments make any difference? Meltzer doesn't think so. "The big error made by those on the left," Meltzer wrote, "is to believe that redistribution permits the 99 percent or 90 percent to gain at the expense of top earners." But the data don't support this claim. If you omit government redistribution from the calculations in the previous paragraph then four countries that previously were more equal in incomes than the U.S.—Portugal, Italy, Israel, and Germany—become less equal than the U.S. In every instance save Israel, these four countries were, when you included taxes and transfer payments, more equal than the U.S. by quite a lot. Omit these taxes and transfer payments and they flip to being less equal than the U.S. Meanwhile, excluding government redistribution makes France about as unequal as the U.S. Including government redistribution made France more equal—again, by quite a lot. If government distribution didn't matter, none of this could be true.
Another factor Meltzer didn't consider is that income inequality is increasing at a faster rate in the U.S. than it is elsewhere. In a separate OECD survey of 24 countries, only Finland, Portugal and New Zealand experienced a faster growth rate in income inequality from the mid-1980s to the mid-aughts than the U.S. (and none of these, according to the latest data, ended up with a level of inequality equal to or greater than the U.S.).
All these calculations are based on the Gini coefficient, a distributional measure that isn't especially good at capturing growth in income share for the top one percent, which is where the U.S. truly excels. Writing at the Atlantic Online, Matthew O'Brien pointed out that American exceptionalism is evident even when you look closely at the seven-country chart that Meltzer used to make his point. After 1979 (which is when the U.S. runup in income inequality began) you see much larger growth in income share for the one percent in the U.S. than anywhere else. Indeed, when you factor out the Anglophone countries (the U.S., the United Kingdom, and Canada), which resemble each other in more ways than they do not, the growth in income share for the remaining four countries (Australia, the Netherlands, France, and Sweden) doesn't seem all that impressive.
In sum: Although income inequality is a global phenomenon, it isn't happening in all industrialized democracies; and in the places where it is happening it isn't, for the most part, as extreme as it is in the United States; and it isn't accelerating elsewhere as quickly, for the most part, as it is in the United States. I'm publishing a book next month that explains why this is so, and that proposes a few steps our government can take to try to reverse the trend. This is not an area in which we want to excel, and if our government makes the right changes we won't.